Banks will be equipped with cutting-edge technology, including machine learning and artificial intelligence, to improve their services and meet customers’ changing needs. Given the optimism surrounding them, one can only imagine how such partnerships will pan out in the future.

1. Collaborate and Build Solutions for the
Bank and Fintech Industry!
In the last few years, the collaboration between banks/Fintech players has
dramatically improved.
This has led to many regulatory changes, customer adoption, and customer-
centric digital ecosystems. In addition, further digitization has been triggered by
the COVID-19 pandemic.
Customers are becoming more comfortable using online services to manage
finances as e-wallets have replaced cash payments.
Businesses prefer to collect payments from third-party payment aggregators.

2. Fintechs can be catalysts for banks because of the constant evolution in customer
behavior.
Banks will be equipped with cutting-edge technology, including machine learning
and artificial intelligence, to improve their services and meet customers’ changing
needs. Given the optimism surrounding them, one can only imagine how such
partnerships will pan out in the future.
What are the main factors driving collaborations
between banks and Fintech companies?
Fintech app development is creating new markets, products, and business
models to meet the fast-paced financial industry. The sector was resilient even
during the COVID-19 pandemic. Today, it has many unicorns that collectively are
disrupting the financial industry.
Fintechs have the potential to make a difference, but they need more capital to
achieve the changes they desire. Banks are here to help. Banks can provide huge
funds reserves that banks can use to help Fintechs innovate and then leverage
these innovations.
But, Fintech is more than just revenue investment. Collaboration between banks
and Fintechs has additional benefits:
1. Reputation as a brand – Banks are legacy institutions with an excellent market
reputation. Fintechs have the potential to make a lot of money from their status
and reputation and quickly build loyal customer bases.

3. 2. Digital innovations – Digital payment solutions profoundly impact customer
behavior. Banks and Fintechs can collaborate to sustain this change and grow
together in the financial sector.
3. Broad consumer base – Think of the collaboration between banks and Fintechs
as a relationship: “you scratch mine, I’ll scratch it yours.” Each party can tap into
the other’s existing customers, further allowing them to increase their market
share and reach an untapped segment.
4. Budget – Banks have large budgets. Fintechs can leverage bank budgets to
improve their product range and technology. The bank can then incorporate new
services it developed into its system, giving it an advantage in scaling and gaining
market share.
5. Scalability – Collaboration between the entities can help each other scale up or
down quickly depending on customer response and overall needs. They can also
brainstorm ways to add more customer-centric features if their combined efforts
are successful.
6. Market experience – Consider banks as feet-on-street entities. Fintechs can
benefit from their on-the-ground knowledge to help them in the cost of building a
FinTech app, and launching products that meet customers’ needs.
7. Fintech-based products – Fintechs offer banks technologically advanced
financial products that can streamline and speed up their banking processes.
Also Read – What is the Cost of Building a Fintech App?

4. How can one evaluate the client’s commitment to data
security as banks and Fintech startups collaborate to
offer new-age financial services?
Security is a top priority for any Fintech or bank. They are very strict about this
matter and will not compromise on security. When a bank is looking to partner
with Fintech, security,and compliance are often the first thing that comes up. If
Fintech attempts to compromise the data security of a customer, negotiations
between them will end immediately. Only after the parties have mutually
understood all the rules and regulations can new products be built and launched
on the market.
Cybercriminals are on the rise, and it is time for cyber professionals to get
involved. They must develop new cyber policies and find better ways to protect
and manage customer data. In addition, banks and Fintech need more robust and
hack-proof systems to get customers to use their services without hesitation.
Also Read – 8 Trends in Fintech Mobile App 2023 that are Revolutionizing the
Market !
FinTech’s role in accelerating financial inclusion
20% of Indians are still not banked. Financial inclusion can be facilitated by a
fintech app development company combining the best of existing and emerging
technologies. This will make banking more accessible, affordable, and cost-
effective for millions of unbanked or underbanked Indians.

5. The government has laid the foundation for Fintech to offer flexible and
innovative digital banking through regulations such as the Unified Payments
Interface, Aadhaar, and open application programming interfaces.
Fintech app development companies with lower operational costs are more
innovative and agile than traditional banks. Here are some ways they can be a
leader:
 Financial services extended to remote areas of the country
India is the second largest country with the highest active internet user. Fintech
app development company can reach remote areas without needing physical
bank branches by leveraging internet penetration and online banking. Fintech app
development company provide access to essential products and services such as
savings instruments and financing. This allows people living in remote areas and
low-income individuals who cannot open bank branches to save money and grow
their wealth.
 Access to credit is increasing
Fintech companies do not require any paperwork to lend, unlike traditional banks.
It makes borrowing money from them more accessible and quicker than
traditional banks. Fintech companies use ArtificiaI Intelligence to assess the risk of
customers with low or no credit histories. These assessments are based on
indicators such as income and spending patterns. This allows small-ticket
borrowers and local businesses to access microfinancing services that enable
them to make capital investments and purchase essential items.

6.  Innovation with speed and compliance
Fintech companies have a lower compliance burden than their traditional
counterparts. Fintech companies can quickly roll out new features and products.
They do this by testing their innovations in secure sandboxes and ensuring
compliance with government regulations and data security. This allows fintech
companies to offer innovative products and services faster while being safe.
 Promoting a cashless economy
Fintech innovations allow for fast and secure digital payments. For example,
fintech companies can instantly verify and transfer digital funds using AI. In
addition, online payment options offer greater flexibility, convenience, and ease,
increase access to essential goods and services, and are more convenient. For
example, online ordering of LPG cylinders and paying utility bills can be done from
the comfort of your home.
FinTech Cybersecurity Solutions
Your top concern should be cyber security during development.
Many organizations need more resources to ensure their platform is secure. How
can you explain the record-breaking yearly numbers of cyber attacks and data
leakage?
Companies concerned about their financial health and reputation must use the
most recent techniques in data security. So what can you do for your business to
be protected?

7. Let’s look at the best practices to build secure FinTech solutions.
Data encryption
Tokenization and encryption are extremely effective financial security solutions.
Encryption is the process of encoding information into code that requires special
keys to decipher it to a readable format. Complex encryption algorithms such as
the:
 RSA. An extremely secure algorithm that uses both public encryption and
private encryption keys.
 Twofish. Twofish is a freeware algorithm that encrypts data in 128-bit
blocks.
 3DES. This is the preferred encryption method to encrypt credit card PINs.
Triple DES splits data into 64-bit blocks and ciphers each block three times.
Tokenization refers to replacing sensitive data with a generated number (token).
Then, use unique databases (token vaults) to decrypt the original data and
convert it into a usable format.
To make your application more secure, you can encrypt the token vault.
Role-Based Access Control
RBAC limits access to the network according to the user’s relationship with the
organization. Your application may have one of the following roles:

8.  Administrator
 Manager
 IT specialist
 Support staff online
 Customer
Because of a different access level, end-users and employees will need access to
corporate information. This will help you reduce both internal and external
security threats.
It takes a lot of knowledge and expertise to develop an RBAC-enabled FinTech
app. Therefore, you should choose an on demand app development company
with the right technology stack and background.
Secure application logic
For FinTech security, a strict password policy is essential. However, more is
needed to protect your application against targeted attacks.
It is essential to use precise authentication technology, such as:
 One-Time Password (OTP system). As an extra layer of protection, dynamic
PINs are used. How do active PINs work?
 Monitoring. This solution can also prevent data breaches by blocking
accounts after suspicious transactions.
 Log-ins are quick. For financial data protection, a shorter session is a good
idea. Why?
Adaptive authentication. Multi-factor authentication does not work. Multi-factor
authentication is not a panacea. It can increase data breach risk (for instance, if
hackers manage to clone your phone). Using adaptive authentication, your system

9. can analyze user behavior and detect suspicious activity. As a result, your
platform will be more secure in financial and personal data.
DevSecOps
Cybersecurity is not the solution. Every day, more than 350,000 harmful and
malicious applications are registered by Internet security institutions. In addition,
the government’s FinTech regulations are constantly evolving. So how can you
keep up with the changing FinTech cybersecurity landscape?
There is a solution. To create secure FinTech solutions, you should use
DevSecOps. DevSecOps makes cybersecurity an integral part of the production
pipeline. This includes architecture design and coding as well as testing.
Test
How can you make FinTech software more efficient? These are proven ways to
build a secure FinTech platform.
 Establish a professional security testing group. Hire vetted engineers,
managers, and programmers who can develop realistic scenarios for data
breaches and help you improve your code. Hiring FinTech security testers
through an outsourcing vendor is the fastest and most cost-effective
method.
 Run penetration tests. This refers to fake attacks on your application. This
will help you identify potential vulnerabilities and fix them with attack-
resistant code.
 Do an IT security audit. Security audits are more than just testing. This
complex process can reveal technological flaws and evaluate FinTech

10. compliance. It also helps to verify the effectiveness of your security
strategy.
Audit and testing help to set priorities in development. These processes, however,
depend on the skills of developers and testers and their interactions.
COVID +FINTECH: A GAME CHANGER IN SME
FINANCING?
Six years ago, over half of all transactions by SME retailers were paper-based. This
was either cash or cheques. This world is long gone. Why? Covid-19 was a
significant factor in digital payments receiving a boost. Many physical transactions
were impossible for a long time due to the pandemic. This made small businesses
need digital alternatives, such as mobile payments, cards, or online. Covid made
ecommerce attractive even for small merchants.
 Customers with difficult needs
This is how SME financing has changed. We need to recognize that small
businesses are demanding customers, regardless of what banks may say about
the importance of SMEs in public. Banks cannot serve SME clients with the same
intensive approach as large corporations. They could not perform this segment
using the same highly automated methods they use for consumers.
Because small customers can’t afford to pay for expensive risk assessments or
management strategies, the corporate approach could have been more feasible.
However, the automated consumer approach proved unreliable as businesses
require additional information that credit information providers need to provide.
As a result, lenders had to make decisions on a limited amount of data. This led to
poor credit decisions and poor SME portfolio performance.

11.  A unique opportunity
Fintech can help fill this gap. The potential for new models that tap into real-time
transactional information from SMEs is excellent. This allows for quicker and
better-informed decisions about capital requirements and risk. Funding Circle, Ant
Financial, eFactor, and Fawry Microfinance are new entities in developed
markets. Fintechs differ from previous models that required entrepreneurs to
supply their data and costly field staff to validate performance. Alternative
financiers are different from traditional bankers, who expect entrepreneurs to
turn up with the required information. They also don’t send high-pressure field
staff with incentives to collect data from the workplace. This is both inefficient
and costly.
These data-driven entrepreneurs give them basic permissions and pull data from
the digital infrastructure. As a result, they can make critical credit lending
decisions in seconds. It takes 3 minutes to submit an online application and 1
minute to decide and transfer funds. No physical contact is required.
Also Read – Why should businesses invest in Fintech Apps?
How to address the risks?
These developments are exciting but with risk. Modern, tech-driven standards still
need to be improved in combating financial crime. Large correspondent financial
institutions that operate in cross-border commerce use labor-intensive and
expensive compliance systems. Although instant payments are becoming more
common, the cost to develop a mobile app remains slow and opaque in most
countries. This is mainly due to the 1920s Telex technology used for cross-border
payments. Data protection is essential because there are risks of data being
shared with SMEs and used in ways that penalize them.

12. Lastly, while SMEs are generating more and more valuable data digitally, too
much critical data is stored in closed gardens under individual companies’ control.
These data silos can limit trade and opportunities as markets mature. This
problem will again fall heavily on small-scale entrepreneurs. These same tech
innovators, who have made progress in the last few decades, could become an
anchor that impedes future progress. We must find ways to encourage more
open and competitive data infrastructures where informed customer consent
drives data access, and all market participants have equal rights to customer
information.
Conclusion
With the development of new digital ecosystems, customer-centric financial
models, and new digital ecosystems, banks and Fintechs can collaborate well. To
leverage Fintechs’ advanced technologies and eliminate outdated systems, banks
need to be more engaged with Fintechs. To understand customer behavior,
Fintechs will need banks’ street-smart expertise. These two sectors can work
together to transform India’s financial landscape and make it more customer-
centric. Connect with Techugo, a mobile app development company for more
latest updates on FinTech.
Contact Us
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